>> and again, i'm not saying that all commitments are not equal. but i think it's pretty clear that the senator from montana and the senator from iowa, excusing, ohio, senator portman have a very important amendment that has to do with e-verify. fundamental, we can assure the american people that the magnet disappears because of the certainty of penalties for employers which is embodied in e-verify which the senator from ohio has spent weeks on.

only thundered like the senator from ohio could come up with the absolute detailed an absolute complete and comprehensive approach to e-verify. a man i admire enormously, but anybody who could be director of the budget has got to be a nerd, as when the. but i admire the senator from ohio's work on this along with the senator from montana. i think, is there anyone who would disagree that what the senator from ohio and the senator from montana our imposing, with e-verify whether someone is in this country illegally and applying for a job illegally? against my the question is, if the senator from iowa doesn't like the list, the majority leader read from, why don't we do some of the other amendments likes or are we not going to do anything in this? and i would like, i will finally say, my friend from ohio, i had

the greatest respect for his intellect and his capabilities. and i know he knows that i was just joking when i, with my comments. as a personal aside, when i was practicing for my failed run for presidency and the senator from ohio played my opponent i began to dislike the senator from ohio enormously. he did a great job as he did in last election. >> i thank my colleague in reclaiming my time. i say when you get nerd from ohio and a farmer from big sandy montana, of course going to get a good amendment. every one of the 17 republican amendments was part of that list of 36. and so, the bottom line is, and now hundreds of more, many more amendments have been filed. and just talking about the

amendment, e-verify is in the bill. i would not quite agree with my colleague from arizona. e-verify will work very well without the admin. i think it will work somewhat better with the admin. it's a good amendment. i'm supportive of the amendment. my staff helped work on the amendment, but let's not say that this bill will have no intro enforcement without the amendment. it has very strong internal enforcement. in fact, it is mandatory e-verify. my good friend from alabama has been railing we need mandatory e-verify in the country for years. and as we work through the process, if the house in its wisdom moves the bill, we can improve things. this is not the last train out of the station, but i would say this. we don't have a bill, we will have no e-verify. improve, not improve.

and so many of the things that many of my colleagues on the other side of the aisle wanted won't be in the bill. so again, to me, has worked in a bipartisan way and i've taken as many criticisms from my study i'll as the other to get this done, what's happening here, not the gentleman from ohio, he is sincerely eager to improve the bill and i support that improvement. but for many others who are vehemently opposed to the bill, there is a view to delay, and delay and delay in hopes i would say forlorn hopes, that they can't move the bill. we haven't been on this bill for a day. we've been on the bill for three weeks. and again, most of the objection, not all, but the vast majority came from the other side and we wanted to move forward. so i would urge, i would urge that we adopt the leaders

motion, 32 amendments, reasonable amount of time to debate them, 17 from the republican list, 15 from democratic list, and go forward. i don't think will be a single objection from our side, i'll tell you that much. .com if you say we want these 32 and then untold more, that's a different story. that's a different story. but again, let me conclude on a happy note. we have our differences here. but it eventually amazing to work with the senator from, the two senators from arizona, and the senator from south carolina and the senator from florida and the senator from colorado and the senator from element and the senator from new jersey but it's been an amazing journey on one of the most difficult issues that face america. we have crafted a proposal that has broad support and strong momentum, momentum that increase

with today's vote and will increase further with tomorrow's vote. please, one of the things that our citizenry of checks to is there's always in a state. it's always easy to say no then say yes your but as has been pointed out when you say no, you are keeping the 11 and under what many have called unstated amnesty -- 11 million. you are keeping a broken system that keeps people out of the country to create jobs and lets people into the country who take away american jobs. you are preventing the change in our immigration system to make america grow. cbo said, wow, that gdp would grow by 3% because of this bill this decade, and 5% next decade. it's obvious that's the energy of immigrants. more immigrants from unskilled immigrants, rich immigrants, educated immigrants.

james madison flake, my colleague from arizona once told me about, whatever part of the globe they came from, worked so hard and are part of the secret to american success. and this bill restored the energy and vitality. so again, this bill is not perfect but we never claimed it would be, but i would urge my colleague, my good friends, my sincere friend from ohio, he's very smart, that's what my friend from arizona once, but as many of the great had to reach as anyone else in this body, cannot say if i didn't get exactly the change i wanted this bill is no good. i can't vote for it. that's what paralyzed this nation in the last decade. and this is an attempt not only to fix our immigration system but to overcome it and i pray to god we will. i yield the floor. >> mr. president?

>> senator from ohio. >> because there were comments made about the amendment, we have offered, let me just be very clear. this is about making the underlying bill were. i do not believe that it will work if we do not have strong workplace verification, similar. both because of the senator from arizona said 40% of the people who are here illegally didn't come across the border. they came there because they overstayed their visas and they're here illegally now. and because when folks want to commit identity work debacle over, under, and around whatever barriers. i'm for more border security. it's a good part of the bill but it does not solve the problem. 54%, that's the pilot program for e-verify. over half of the people who are illegally come to get work are getting through. spent would the gentleman yield? >> i don't think the bill will work and i'm not going to vote for it if it doesn't strong enforcement because i don't think people come out in the shadows the way people want to have them, including me. and i don't think we can stop

people from coming in the future, the flows of illegal immigration just a result in 1986 cannot be curtailed unless the strong -- >> would the gentleman yield for a question? >> i yield. >> is my understanding that the senator from ohio, literally weeks, insulting interest, consulting labor, consulting the most best high-tech people in america, has come up with these fixes which all of us, no matter how we are on this issue, agree, we dramatically improve our capability, make sure that anyone in this country is legally here before they obtain a job. and maybe, it might be helped to our colleagues that you could describe just for a couple of minutes if you would what you've been through in the process of coming up with this product to make sure that this is really a system that can work.

i'm not sure that people are aware of that. and again, i say only someone with your background and knowledge and expertise in my view could've come up with this amendment, along with the senator from montana. >> i thank my colleague. i have explained this on the floor in some detail and why it's important with speeding of the time for e-verify to plot including a real trigger. it's comprehensive including having the ability to verify somebody's identity which is the problem now with e-verify by photo much, by doubling the match the coast of the state. advanced privacy protections. it also ensures that we don't create a national database that could have potential negative consequences for all of us as citizens who care about civil liberties. so it's a great balance. we have worked with the chamber, we have worked with the white house, we have worked with the republicans and democrats alike are we work with people in the gang of eight. it's not exactly the amendment we drafted. ours was even tougher i would say in some respects but it's an amendment that i believe in my heart if we could get this

amendment passed would create a system that we strong enough to great a real deterrent. in my neck incentive to work is so strong that we can solve this at the border plus as you indicated my colleague from arizona, folks are coming over having overstayed their visas. let me say one more thing if i could, please, mr. majority leader. the gentleman from iowa has 34 amendments that he tells me would like to have offered. i don't know if all 34 of those would actually be offered. some of them as my colleague from new york that are being offered by the same senator. i would imagine there will be some voice votes. i know as i said earlier that has been a time agreement. it has to be reasonable. i know there has to be a limit. it seems to me there's a way for us to get there. again, to show the mac and people, we just don't have 10 commandments on the floor. we have the ability to your not just of our amendment, senator tester and myself which is critical to me to having this bill succeed, but also other members who have the right to be

heard. i hope we could come together. i misspoke earlier and said it was last july. it was to july's ago. i remember missing them because we are voting. why? because want to send some time on the buffett rule. we all came back and it. it didn't go anywhere. i would only suggest this is even more important. if we have to stick to the we can come if we have to ensure that we stay up late tonight and tomorrow night to get this done, i hope we will do it to provide inability to find a way forward where we have these amendments and significantly would offer an amendment like this one that enables this bill to work and enabled us to have more support of this goes before the house of representatives. i yield back. >> i've been very patient today. but i've just about had it on this. all this pontificating on this amendment, all right, this is senator from ohio was offered to

put this in the bill. he turned it down, and we're spending all this time here because he's, he's been agreed in some way. he had the opportunity to put this amendment in the bill as it's offered. so i want to be quiet here all day, but this is enough. this is enough. the american people need to know that he had the right to put in the bill. agreed on it, he said no. i assume he wants a big show, inseparable. i've had enough. i know he's a smart man. he's the head of omb. a lot of good things. i know nothing bad about him. but that's enough of this. enough of this. >> mr. president? >> the senator from montana. >> i just want to talk a little bit about this amendment, 1634,

very quickly. the good senator from ohio has talked about and it's been well but i want to talk about a few things. dissonance of stance improves privacy protection for e-verify programs. that's a good thing. it ensures no federal database will be created using a photo to our other data from the state dmv database. that's a good thing. it ensures no federal government agency can access information made available under e-verify. it's a good thing. it increases privacy protections using established techniques such as requiring an individual be notified when their social to the number issued for the purpose of employment their vacation in a minute that is potentially fraudulent. that's a good thing. and it requires new regular reporting of suspected fraudulent use of the e-verify process. this is a good amendment. it will make a good bill better and for that reason i would ask unanimous consent that an amendment 1634 b. in order for the purpose of a vote on the united states senate floor. >> the senator from iowa.

>> i reserve the right to object but it will object. i want the members of this body to know that i very much am interested in e-verify stuff, as i have legislation and for mandatory e-verify. i was involved in several senators in 2007 as we tried to get amendment bill put together in 2007, and those negotiations, and it's a case of something very important. and i happen to support this amendment, but it's one of 34 others that we sent over to the majority to give us votes on. our side isn't going to let the other side take our amendments and choose our amendments that will be adopted any more than

they would let us decide what democrat amendments are going to be offered. so that applies to the portman amendment as well, and tester is a cosponsor of it. we had this setup where we were asked to put together amendments. it happens to be a republican senator, someone who just spoke, involved in this colloquy asked me to put together some amendments. so i worked hard with a lot of dissenting republicans about how we should do this process, put together 34 amendments, and gave them to that senator and he was going to go and negotiate with the leaders, or the majority. and it seems to me that i ended up giving my and amendments just

to end errand boy. didn't do much negotiation. and so we are here where we are. and also for that senator, i want to tell him that he said, well, we can to 15 vote a member snowe and then maybe to 50 more, and then 50 more. well, the unanimous consent request said that after we do those amendments that were asked to do, the bill be read a third time and the senate proceed to the vote on final passage of the bill. so that wouldn't have been a bunch of so many, then another tranche. so here we are. even though i think it's a pretty good amendment. when we were promised a free and open process of amendment, and the group of eight promised that. from day one that they put their buildup, that this bill can be

approved well, we've had a chance to improved i a dozen votes, and that's it. so i'm sorry for mr. portman and for mr. tester that i have to object to their amendment, but i do object. i think, we've got two and a half weeks that we could've been doing a lot of these things. we're going after rely upon the other body to get a decent bill to go to the president of the united states. i yield the floor. >> mr. president? >> objection is heard. the senator from montana has the floor. >> mr. president, the senator of montana and yield one minute for me? >> i yield. >> without objection. >> mr. president, i think myself myself of one of the columnist people around here, -- homeless people around here. i think let's get a few in perspective. when this bill was before the

t-shirt made there were 300 amendments filed. 300. we put them online every single person saw we can have before what the amendments were. we then brought them up. i bring up one from one party, then one from another. we did this day after day after day into the night. until people said we have no more amendments that we want to bring up. we adopted around 140 of those amendments. all but three of them were republican and democratic votes. is a number has a chance to amend this, we nearly 140 amendments, including and minutes from the senator from iowa and others. and myself. all but three of these 140 or so were by bipartisan votes. and i well remember the last

night of that market late in the evening, i said that as any senator, republican or democratic, have another a minute they wanted to know. there was not any more amendments. and we boarded out the bill. we have offered to help roll call votes on 15 democratic amendments, 17 republican amendments, and then another almost 30 amendments, 29 amendments, that everybody agrees should be passed and do it en bloc in the manager's package. now, i know some, not the senator from iowa, because he's been a longtime, but i know there are some senators are new to this body. i've been here 38 years. i've seen great legislators and the republican party, great legislators and the democratic party. we always talk about the hundreds of amendments when no

are going to get down to a finite number. and then you agreed to vote on those and you usually have a manager's package where both republicans and democrats agree these could be done en bloc. this is what we have done. several amendments you on the floor, 140 in committee. we've offered 15 democratic, 17 republicans, another 29 en bloc. the objection do not come from the democratic side are it came from the republican side here including some who said they would never vote for any immigration bill whatsoever. the distinguished majority leader has more patience than the senator from vermont, and i applaud him for his patients. and i've not spoken on this

point, and i apologize for taking the time, but it is frustrating to me to do these numbers when so much work has been done by both republicans and democrats on this bill. to get to the point where we are. i respect my friend, senator portman, but he was offered the opportunity to put his amendment in the package, which is agreed to. i had amendments i would love to have, to say here's the leahy amendment, passed on the floor. i said no, i more interested in getting it passed, i put in the package and let it go through. i don't need to have my name on a. i just want to get forward. so i thank the senator from montana for letting me have the time. >> the senator from montana as the floor. >> i did want to get back to the member for just a second here, since it was objected to. we wonder why we've got single

digit approval rating in congress. people out here that i represent, they are democrats first, they're not republicans first. they are americans first. this and was objected to the summer you actually agrees with the amendment, but if you're home watching this on tv or sink what is going on in washington, d.c.? we got an amendment that people agree is going to make this bill better but yet it is objected to. wide? because there's going to one or two more votes for this bill in the end, is that what? because if it is that's not a good reason. look, we all live in this country. we all want this country to work. we all wanted to continue to be a leader in the world. this amendment makes a good bill better. i want to kick it to the senator from ohio just for his closing comments on this amendment. >> i thank my colleague. there's been discussion both by senator leahy -- >> without objection the senator from ohio is recognized. >> who was confident are you in

his absence by the way he handled this bill in committee by senator gaza because the number of amendments he did offer allowed republican the democrats to offer. but to my friend the majority leader and to the senator from vermont, yes, we are offered send a test and i were offered the opportunity put the legislation into the whole then-corporate minute. by the way, the idea was we do cosponsor that site and see which end up being about 1200 pages. we chose not to do that. senator tester not for very simple reason. we wanted to have a debate and vote on this issue. i discussed this on the florida three times and i will discuss once more because apparently the senator from nevada wasn't there to hear it. but we believe and i'm passionate about this as you can tell that if we don't fix the workplace we cannot have an immigration system that works. it's as simple as that. i did not have a separate debate and a separate vote on this amendment on this issue does not give us the possibility of

sending this over to the house with a strong message, and maximizing the chance to house of representatives will see that strong bipartisan vote on this important issue of workforce, workplace enforcement to ensure its part of the final package. it's that simple. if it had been part of the so-called border search amendment, rightfully so, members from the other body and is observing this process would've said it wasn't about e-verify, it wasn't about the workplace, it was by the border, it was about 20,000 border patrol and it would've been right, let's be honest. we asked some very simple. we should give us the opportunity to have a debate. it's not about us. it's not about politics. it's about the substance of the legislation to make sure that coming out of the shadows will have the biggest total by more difficult to find a job if they are illegal. to ensure that we don't have a future flow of illegal immigration because we've had again and employment verification system that works and to show that there is a partisan support for the. look, it's frankly not a very

popular part of the legislation and over the years it hasn't been. in 196 it wasn't. that's why it was never implemented because there's an unholy alliance him on employers, among folks are presenting labor union members, among folks representing some certain constituent groups who feel that might be some discrimination or other issues. that's why we've carefully crafted his amendment to address those concerns and want to be sure we have a separate debate and vote. and by the way, we are talking about a five minute debate. we still hope we will get it because it makes too much sense but we could not only senator tester and i could not even that that couldn't be possible in this body. the world's greatest deliberative body couldn't spend 10 minutes debating this crucial issue and to show on a bipartisan basis what kind of support for is for not just dealing with the border but also getting with the workplace. which in my view is the critical element here. we made a mistake in 1986 by not writing the ledge ocean probably and not implementing what we have in terms of employers sanctions. that's one reason although

3 million people were given to go status and amnesty, millions working to the point now that 12 million people live in the country in the shadows. we have to make sure that problem is addressed. that's why legitimately we thought it would be appropriate for this body to take up that issue and have a vote on it. and i stand by that. i think we made the right decision although i am very, very discouraged by the fact it appears as though there might be some sort of roadblock. let's get a reasonable list. let's get reasonable time limits. let's work through these amendments. we could abandon yesterday. we can do them to more. we could be over the weekend. two years ago we stayed in a july 4 to talk about the buffett rule which never went anywhere. this is not as important? substantive legislative that we hope will become the law of the land? and definite impact on all of us as a brick and citizens and the future of our country, nation of immigrants and laws. i ask again, mr. president, that republicans be reasonable, democrats be reasonable, let's come together with a list that makes sense but let's vote on

these amendments. let's start doing our work. >> in a few moments -- >> tell us how the debate is going on the senate immigration bill. >> they are on the path towards passage at some point before they go home and do their fourth of july recess. it's only a matter of when the people who are opposing the bill are going to give up and allow everyone to go home. that may sound trite but it is, in fact, what's going on. after senator corker and senator hoeven put together this big omnibus amendment include a lot of poor security that was going to be more or less the last piece that went through. so now they're just trying to tie up the loose ends and make sure that if there's any other striking people out there who might vote for it, if in figure out a way to get them for time, they might but for the most part we are done. >> are there any straggling amendments? when this debate started the talk was that everybody's going to get a chance on amendments. why don't they get have an

agreement to wrap up amendments? >> while i mean this is typical, as i think you and anyone who's been watching the senate for a long time, that by the time you close to final passage you have to come up with a debate at some point. the are a couple of minutes of still outstanding that people say they want votes on. one of them is particularly of interest, senator rob portman of ohio as an amendment that would tighten up the electronic verification system. it has been vetted and approved by everyone on both sides of the aisle. people i think our little nervous about it. it's not like they're thrilled about it but they would support it and portman has indicated that he would support final passage of the legislation if the amendment was put in but he also asked for a separate vote. as you're trying to cut down towards legislation asking for a separate vote is kind of a big deal. that means that if there's someone else on the democratic side who wants a separate vote on their amendment, they have to get that in the next immunity

that someone else raising enhancing i want a vote on my amended. by their children figured out as far as i'm. >> you wrote that electronic revocation is considered an essential part of the underlying bill. why is that? >> we have to backup a little bit. this is not the portman, this is what's in the underlying bill which is, it's a mandatory electronic verification of people's names, birth dates and sources good numbers for everyone, not just immigrants who are being hired into new jobs. it's essentially a way of checking to make sure they are who they say they are. right now a lot employers just use a paper i-9 form and that subject to a lot of fraud. and in the are employers who use the e-verify system, which is currently voluntary, but it's not entirely foolproof because if you have someone's name, birthdate and social getting number, you can say that you're that person and it will pass through the electronic revocation no problem. but only a small percentage of

employers are actually using e-verify the. it's far more effective than the current i-9 system. and everyone from president obama to chuck schumer to lamar smith of texas in the house of representatives have all said that in order to do anything to actually stop illegal entry and implement in the united states, you have to have everyone using e-verify. >> what's the president was the admission said about the bill that is emerging from the senate? >> they are happy with it. my understanding is that they have been really careful about looking at the latest border security peace that has received final approval earlier today. this is the one that would add 700 miles of the border fence and it would have something like $46 billion injected into the border. another 20,000 troops. all that has been vetted thoroughly by the white house and deb richard democrats were a little concerned that they can make sure it's all in place 10 years from now such that the

first provisional immigrants who would be getting a green card at that point and actually go through the process. >> will harry reid get a vote before the recessed? >> oh, sure, no problem. i mean, i think i'm there, the clock is running out no matter what. it's just a matter of whether or not the senators get to leave in the morning or in the evening, which barbecued to get to attend. and you know, as we know he always threatens to keep members in over the weekend to try to work things out. that thread is never carried out but is just a wave making sure that people know that they have to make a choice but if you want to stay and debate and memos that may or may not get past or that will most likely get voted down, they are free to do that but also keeping everybody else from going and being with their constituents but usually that's a pretty strong draw is having people say okay, let's vote on final passage. >> switching gears, what's up with the house? is there bill next and the

spotlight. >> i would call the bills, there's several on their plate. the house judiciary committee is, as was the, marking up their own e-verify bill. is mandatory e-verify and they're also going to be before they leave they will be passing a bill to increase the number of h-1b will be suspect of several of these bills they pass over the course of the last couple of weeks. no indication yet though on whether they are going to get floor votes. it's certain possible, and that's certain is something the committee is preparing for. one of the big issues that most advocates of comprehensive reform have pointed out is that the house judiciary committee bills or passing on with republican vote the democrats agenda, some of the professions that it passed they don't like iat all. for example, last week they passed a bill to give local police officers the ability to apprehend and detain illegal immigrants, which is far and above beyond what the current

law allows and democrats will not support that in any fashion. but they're also passing legislation that democrats think should be part of a bigger package. so that's going to cause a little trouble wednesday by trying to put on the floor after the recessed, remember what happened with the form happened with the former count on republicans to pass something can be a dicey prospect. but i'm told by the speaker's office what they really want to do is go home and see a constituents react to the senate bill. because that's big in the news and its constituents are saying hey, why did you do something like that, in the house might change their tune but most of the rank of our daughters that account is a their constituents are telling them to stop the senate bill from going into any kind of enactment. >> fawn johnson covers congress for "national journal" and you can read her stories at nationaljournal.com. thanks for the update. >> you're welcome.

>> it is criminal to mean that i had to authorize my budget people, my financial people to write a check for $454 million, although more than a month ago to extend our contract with the russians to continue to carry our chris to the international space station on site is 2016 and 2017 because we have not yet brought about the american capability that is coming with our commercial crew program. the president's budget called for $821 million for commercial crude. we are not halfway there. the congress has just, my job is

to try to persuade the congress that the plan is good and it was going to be efficient users of the taxpayers money, and i've not been successful in that yet but i'm working on. we are up to 525, but as i told every member of congress with whom i've talked, 821 million in the 2014 budget is vital if we're to make the 2017 date so that what newt gingrich said is true that americanamerican s are transported to space again on american spacecraft. >> more with nasa administrator retired marine corps general charles bolden sunday night at eight on c-span's q&a. >> federal regulations say a height in federal student loan interest rates could affect future borrowers. and increase the attractiveness of private financial prospect that does what came before a senate banking committee hearing on the increasing trend in students taking out private funds to finance their higher education.

the hearing comes as congress approaches a deadline to keep certain federal student loan interest rates low, or double, to nearly 7% in this is an hour and a half. >> good morning. good morning. i call this hearing to order. for many americans, a college degree is an important goal that can mean a lifetime of better earnings and opportunities. however, this goal has come at a higher price. the cost of education has risen significantly in while the job market has weakened, straining a generation of americans seeking to establish themselves in the broader academy. student loan debt now stands at over $1 trillion. and decided only to mortgage debt as the largest form of debt in the country. student loan balances have

almost tripled since 2004, and an alarming one-third of borrowers are delinquent on their loans. last year, nearly eight out of 10 students in my own state of south dakota graduated with student debt. these rising debts reached beyond individuals and, in fact, many sectors of the economy. [inaudible] student loans mean many putting off buying a home on never become homeowners at all. student loans make it harder to stretch small businesses don't student loan payments often take part -- priority over retirement savings. and writing student loan balances in states like south dakota make it harder for graduates to stay in rural communities. while most student loans are

federal, private loans make up $150 billion of the market. private lenders allow many students to attend college who would not otherwise be able to afford it, and may sometimes offer better terms than federal loans. however, nearly 1 million borrowers are in default on their private student loans. and while federal loans offer flexible relief during periods of hardship, most private student lenders do not offer the same options for struggling graduates. our witnesses today represent the federal agencies responsible for ensuring that lenders balance sound lending principles with appropriate measures to avoid default. i look forward to hearing to your testimony on guidance you provide a lenders and what

limitations lenders may face in providing relief. the cfpb has been very active in private student loans, recently publishing a proposal to oversee large student loan servicers, and a report on affordable private student loan repayment. i'm interested to hear from the cfpb on both of these efforts. next week, on july 1, millions of students face a doubling of the interest rates of some federal loans. and i urge the regulators to be vigilant in monitoring growth in the private student loan market that may result from changes to the federal student loan market. it is critical that regulators respond quickly to marketplace

changes, and that consumer protections are safeguarded when demand rises. with that, i turn now to ranking member crapo. >> thank you, mr. chairman, for holding this hearing today. student loans play a vital role in the lives of many students and their families across our country. the loans help maintain a strong and educated workforce by ensuring all americans can have ensuring all americans can have access to higher education regardless of their financial circumstances. recently, the new york federal reserve reported that student loan debt has risen to become the second largest household debt burden behind mortgages. the total outstanding student debt was $986 billion in the 1st quarter of 2013. just nine years ago, that number was $240 billion. several factors have contributed to this student debt explosion over the last decade, including college tuition rates that have significantly outplaced inflation and a record number of students and employees opting for school in light of very

tight job prospects. when discussing the student loan market there is considerable confusion as to who is making the loans and how the loans are made. according to the consumer financial protection bureau, 85% of the total outstanding student debt is in federal student loans offered through the department of education. that is roughly $838 billion. private student loans, the subject of this hearing, only make up 15% of outstanding debt and that market is expected to shrink further. a recent standard & poor's report noted that new originations for federal loans occupy roughly 94% of the market, while private lenders originate the remaining 6%. much of the contraction in the private lending market is due to the restructuring of the department of education loan programs in 2010 to virtually eliminate private lenders. other important considerations

include the fact that federal loans default on average three times as often as private loans; federal loans do not undergo an underwriting process; and there is almost limitless lending for borrowers who take out federal loans for graduate school. with respect to private student loans, one concern i often hear is that banks do not offer enough borrower relief options. in the testimony submitted today, it appears that prudential banking regulators and the cfpb are offering conflicting guidance on borrower relief options. the cfpb is pressing for more borrower relief, yet the prudential banking regulators are concerned with how modified loans affect a bank's safety and soundness as well as may violate accounting rules. lenders have stepped up and expressed their willingness to help more troubled borrowers, citing that loan modifications may benefit both borrowers and lenders in certain circumstances. today, i hope we can gain a

better understanding of the obstacles directly from the regulators. i also would like to hear about how the regulators are working together to resolve this conundrum of providing student loan relief while not endangering the safety and soundness of the system. finally, since the vast majority of student loans are made by the department of education, we need to acknowledge that the committee on health, education, labor and pensions has a critical role in determining whether the department of education's student loan programs are helping the situation or binding students and their families into too much debt. i know all my senate colleagues want to find a solution to ease the burden on our young people. mr. chairman, before we conclude, we received a letter from the consumer bankers association and a letter from the financial services roundtable regarding student loan issues and i would request that both letters be entered into the record. >> without objection. >> thank you.

>> thank you, senator crapo. are there any other members members who wish to make a brief opening statement? senator reed? >> thank you, mr. chairman. thank you very much for holding this hearing, and we are reaching a tipping point with student loan debt, as you and senator crapo have illustrated, particularly as we approach july 1 with a potential doubling of the loans, students who have the most need in our country. student loan debt as both my colleagues have indicated is with the next big financial crisis and could have a lasting effect on our economic growth and for coming generation. we've seen student loan debt rise throughout the recession even as other household debt has fallen. in student loan debt as my collective indicated is now the second largest outstanding balance after mortgage debt with respect households. and this is affecting the life trajectory of generations of americans, the an people today d if we don't do anything, even their children.

our students, are caught between a rock and a hard place. the job market demand post secondary education. at the same time colleges getting much more expense because been a major core shift in higher education. the costs are going up, state support for public institutions has gone down, and as a result tuition for rising. in fact, exploding. 68% of federal student aid is in the form of loans. and i have the privilege of holding the seat held by laybourne pell. when he introduced the pell grants back then the mix was much different. i think as it doesn't grant in 20% loans. and we have flipped, turn the whole thing over on its head. in fact, any of my contemporaries were the beneficiaries of that wonderful 80% loan to 20%, 80% grant to 20% loans effort and when i

keeping up with that at the federal level. we have to keep these loans affordable. low interest rates, and again it is distressing minute of us that we're on the precipice of doubling the subs is a great from 3.4 to 6.8% in just a few days. ironically as we increased the rates and my colleague from massachusetts, senator warren, has put out again and again the federal government is making a $50 billion this year on their loans and expected to make 10180 doing between now and 2023. so there's a lot of money, it's just not getting the young people that needed and their families. we have got to work on both sides here and we have recognized that we have to be back where we were, i believe, in the '50s, '60s and 70s. we're using federal resources to help people get to college, now using students to pay down the debt. and many of my colleagues are

suggesting that we do precise the latter, not the former pixar look for today's testimony, broader issue of private loans but we will have a crisis that is the force. thank you, mr. chairman. >> is there anyone else? senator brown. >> thank you, mr. chairman. i appreciate senator reads words. my wife is the daughter of a utility plant maintenance worker and a home care worker and she graduated first affinity for to college from kent state 30, i will say how many years ago, 30 bushes go with student loan, student debt of about $1200 but i think that tells the story that image. thank you to the witnesses and thanks for holding this hearing. in november 2000 night i introduced legislation to create a private education loan ombudsman. these provisions were part of dodd-frank in 2010. some three announcers later it's gratifying to see the great work that cpb's first student loan ombudsman, mr. chopra is doing

with this office. thank you for that. speaking out about issues, helping borrowers get rid relief. about a year ago my subcommittee held a hearing on private student loans where mr. chopra and i discussed the discrepancy between the low rates at which banks borrow and interest rates that they charge students, something that senator reed and senator warren of both talked about the example, the nation's largest student loan lender bars at an average rate of 1.45% while the average private student loan borrowers is paying more than five times that amount, some 7.9%. mr. chopra's test my been noted, now notes the increase in private student loan lenders interest margins quote making sure a lack of competition as well as an opportunity for more efficient private capital participation. the president of the nations largest student loan said in january that margins are are really a function of alternative financing opportunities. we are making loans to parents and students, family education

loans. their alternatives are fairly limited. today, i am proud to announce that my fellow member of the banking committee, senator heitkamp and i, along with vendor turbine and we are introducing legislation to create opportunities for borrowers to refinance their private student loans. refinancing education fund to invest for the future act or refi for the future would authorize treasury secretary in consultation with the education sector of the cfpb to create a program to encourage competition and spur refinancing of private student loans. the most indebted student borrowers are the most likely to have a private student loans over $1000 that senator crapo mentioned in student loan debt, only about 15% but that's to $150 billion in the privacy low market. something we can do something about. senator heitkamp and my legislate love to do that. thank you, mr. chair. >> does anybody else dashing

senator heitkamp? >> you know, a couple months ago i hosted a housing to across north dakota. we have an acute shortage in affordability, issues due to our economy. as things grow. of the roundtables i conducted, one issue came up over and over and over again. which is that young people cannot get entry into the market because they are not bankable. they are not bankable because they are carrying thousands and thousands and thousands of dollars of student debt. and families talk to us every day and say, how come at a time of record low interest rates we are paying eight, nine, 10% on our student debt? we cannot continue this, and we know from massive credit card interest and that if we do not figure out a way, they will continue to pay the interest and never get out of the principal debt and never be bankable. never be able to get a loan to build a business, be entrepreneurial. this is, is crushing the future

of our economy if we don't deal with it. and this is a small point. obviously, not a big part of student loan issues. we're concerned about the rates but we are also concerned about giving those people with private loans an opportunity to refinance, just like you would if you had a mortgage. and so i want to applaud senator brown for the work that he has done. i'm proud to be on this, and want to thank the chairman and ranking member for holding the string. this is an issue that won't go away. it is an issue that we will continue to work on and we know we have secured a viable future for american families. and they won't be, you know, buried under with student debt. thank you, mr. chairman. >> thank you all. i want to remind my colleagues that the record will be open for the next seven days for opening statements and any other materials you would like to submit. now, i will introduce the members of the panel.

rohit chopra -- and i pronounce that correctly? >> close enough. >> is the student loan ombudsman at the financial, at the consumer financial protection bureau. john lyons is a senior deputy comptroller for bank supervision policy and chief national bank examiner at the office of the comptroller of the currency. todd vermilyea is the senior associate director for bank and supervision and regulation at the board of governors of the federal reserve system. doreen eberley is a director of risk management supervision at the federal deposit insurance corporation. i thank all of you again for being here today. i would like to ask the witnesses to please keep your

remarks to five minutes. your full written statements will be included in the hearing record. mr. chopra, you may pro proceed. >> thank you, mr. chairman, ranking member crapo, and members of the day for the opportunity to testify today. it is clear that many in congress are keenly interested in find solutions to some of the troubling trends in the student loan market. understand when many policymakers across the country are seeking to address some of the underlying drivers of growing student loan debt, including the rising cost of tuition. however, it will also be prudent to address the large pool of existing debt owed by millions of americans. the consumer financial protection bureau estimates that housed in student loan debt is s approaching $1.2000. while most of the market consists of federal loans. 81% of our high debt undergraduate borrowers used private student loans.

and like a business, the consumer's ability to manage cash flow is absolutely critical to financial health. private student loan providers generally do not offer this cash flow management option which is available to borrowers of the federal student loans. and for private loan borrowers who default early in their lives, the negative impact on the credit report can make it even more difficult to pass employment verification checks, or ever reach the dream of buying a home. what risks in the student loan market do not appear to jeopardize the solvency of the financial system, the difficult these borrowers face when trying to manage cash flow may have a broader impact on the economy and society. we recent publish a report on what we heard from the public about these potential impacts. the national association of home builders wrote to the bureau about the relatively low share of first time home buyers in the market, compared to historical levels, ma and that student debt

can quote in there the ability of recent college graduates to qualify for a loan. and when young workers are putting large portions of their income toward student loan payments, they are less able to stash away cash for the first down payment. in submissions by coalitions of small businesses, groups have a number of factors by the threat of student debt. for many it is critical to invest capital to develop ideas, market products and create jobs. but high student debt burdens require these individuals to take more cash out of the business so that they can make monthly payments. the american medical association wrote that i debt burdens can impact the career choice of new doctors, leaving some to abandon caring for the elderly or children for more lucrative specialty. student debt can also impact the availability of other professions critical to the lives of rural communities. according to an annual survey,

89% of the veterinary students are graduating with debt, averaging over $150,000 per borrower. veterinarians in common with high debt burdens may be unable to make ends meet and at their medicine or livestock management practice in remote areas. classroom teachers amid a letter to be getting the impact of private student loan debt which don't always offer the income-based repayment options or loan forgiveness programs. when it was concerned about the domino effect of problems in the capital markets, policymakers took action. in 2008, distress in the credit markets led the federal government to enact policies to assist financial institutions to raise capital for student loan issuers. while programs like -- were primary design to assist financial institutions to originate more loans, understand them might be useful for policymakers seeking to address some of the market failures

faced in this market. in our recent report on student loan affordability we discussed a number of ideas put forth by the public. i want to briefly note to that might increase private capital participation and market efficiency. the first is spurring loan restructuring opportunities. most private student loans have few options available for alternate repayment plans. policymakers might look to provide a passport for borrowers in distress, creating a transparent step-by-step process that leads to affordable payment terms where monthly payments can match a reasonable debt -- this may be helpful to financial institutions as well who can recognize a higher net present value of loans in distress. the second is jumpstarting a student loan refinance market for borrowers have dutifully managed their monthly payments on interest rate loans. many raise the need for a way to

refinance. this approach could give responsible borrowers the opportunity to swap their loan for one with a lower rate. when mortgage borrowers and other sea rates plummet, they try to refinance, responsible borrowers should have that option, too. thank you for the opportunity to share insight on this date of the market and look for to any questions you have spent thank you, mr. chopra. mr. lyons, please proceed. >> chairman johnson, ranking member crapo, members of the committee, i appreciate this opportunity to discuss the supervisor approach to private student when he conducted financial banks and federal associations. promoting for an acquittal access to credit including education financing is a core occ mission and one of our highest priorities. financial assistance is an important means of helping promote higher education in this country. national banks and federal savings associations have a long history with federal and private student loan programs but they make up just 3% of the approximately 1 trillion an outstanding student loans in

this country today. however, the private student loans offered by national banks and threats provide an important supplement for many students seeking to finance through education. for most consumer loan such as auto loans, the underwriting structure and management of the loans are straightforward. the funds serve a specific purpose and source repayment is well defined and easily assessed at the loans origination. student loan scam however, pushing the challenges for lenders and borrowers. for example, student loans often require a several year commitment that extends beyond when the students start school into repayment begins after the education is complete. private student loans are usually unsecured and a significant i may pass between when the letter advances the funds and when that student reaches their anticipated lending potential. in addition because the government does not guarantee private student loans as it does federal student loans, many lenders require process to help ensure repayment. not withstand the challenges of

private student lending we expect national bank and thrift lenders to provide flexibility to borrowers when appropriate. for example, lenders typically defer payments until borrowers are in school, while borrowers are in school and offer great spirits after were still borrowers transition to employment. .. >> for managing forbearance, workout and modification programs. while the occ encourages

national banks and thrifts to work with borrowers facing difficulties, this does not leave the responsibility to insure that regulatory reports and financial statements are accurate and representative of the financial condition of the institution. neither the public, nor the banking industry should confuse the expectation for full and accurate reporting as a limit on available forbearance, workout or modification programs. to be clear, our student lending guidance requires banks to report the volume and nature of these transactions accurately. the flexibility to assist borrow ers is not mutually exclusive. my testimony concludes with a discussion of a number of policy recommendations to strengthen student lending. overall, the occ supports recommendations aimed at improving the transparency of student loans to help students and their family make better informed decisions.

likewise, we support loan documents and billing statements that are easy to read and understand. in closing, while private student lending is a small part of the available financial assistance in this country, it is an important part, and we encourage banks to work with troubled borrowers during periods of hardship. thank you for the opportunity to testify, and i'd be happy to answer your questions. >> thank you, mr. lyons. mr. vermilyea, please proceed. >> chairman johnson, ranking member crapo and other members of the committee, thank you for the opportunity to testify at today's hearing. first, i will discuss recent student market trends in both government guaranteed and private student loans. the student loan market has increased significantly over the past several years with outstanding student loan debt almost doubling since 2007 from about $550 billion to over $1

trillion today. balances of student loan debt are now greater than any other consumer loan product with the exception of residential mortgages, and this is the only form of household debt that has continued to rise during the financial crisis. since 2004 both the number of borrowers and the average balance per borrower has steadily increased. in 2004 the share of 25-year-olds with student debt was just over 25%. and it stands at more than 40% today. at the end of 2012, the average balance per borrower was slightly less than $25,000 compared with an average balance of just over $15,000 in 2004. of total student debt outstanding, approximately 85% is government guaranteed in some way while private loans represent 15% of the market. while federal student loan originations have continued to increase in each year, private loans' originations peaked in 2008 at roughly $25 billion and

have dropped sharply to just over $8 billion in 2012. in line with the rapid growth in student loans outstanding, the balance of student loans private and guaranteed that are currently delinquent has risen sharply, standing at 11.7% in 2012, a large increase from 6.3% in 2004. however, some 44% of balances are not yet in their repayment period, and if these loans are excluded from the data pool, the effective delinquency rates of loans and repayment roughly doubles to 21%. of the $1 trillion in total outstanding student loan debt, about $150 billion consists of private student loans. in the private student loan market, roughly 5% or $8 billion is deliberate. there are a number of factors underlying the difference of loans. for instance, underwriting

standards in private student loan market have tightened considerably since the financial crisis, and today almost 90% of these loans have a guarantor or cosigner. the federal reserve has no direct role in setting the terms of student loan programs. the federal reserve does, however, have a window into the student loan market through our supervisory role over some of the banking organizations that participate in this market. federal reserve supervision of participants in student loan market is similar to our supervision of other retail credit markets and products. for large institutions the federal reserve regulates with significant student loan portfolios are on-site examiners who evaluate credit risk management practices including timely recognition of loan deterioration and appropriate loan loss provisioning. the federal reserve and other federal banking agencies have jointly developed guidance outlining loan modification

procedures that discusses how banks should engage in extensions, deferrals, renewals and rewrites of closed and retail credit loans which include student loans. any loan restructuring should be based on a renewed willingness and ability to repay and be consistent with an institution's sound internal policies. the federal reserve encourages its regulated institutions to work constructively with borrowers who have a legitimate claim of hardship. moreover, federal reserve examiners will not criticize an institution, institutions that engage in prudent be loan modifications, but rather view ifications as a positive action when they mitigate credit risk. as supervises, our goal is to make sure that lenders work with borrowers having temporary difficulties in a way that does not compromise sound risk management reflecting the true quality and deliberate again

si -- delinquency status of portfolios. higher education plays an important role in improving the skill level of american workers. due to increases in enrollment and the rising costs of higher education, student loans play an important role in financing higher education. the rapidly increasing burden of student loan debt underscores the importance of today's hearing. this concludes my prepared remark, and i'd be happy to answer any questions you have. >> thank you. mr. vermilyea. ms. eberly, please proceed. >> chairman johnson, ranking member crapo and members of the committee, thank you for the opportunity to testify on behalf of the fdic on the important topic of private be student loans. in today's fragile economic environment with persistently high levels of unemployment and underemployment, many consumers are struggling with debt loads from student loans both federal and private. we understand the concerns of struggling private student loan

borrowers and encourage the banks we supervise to work construct ily with these borrowers. while it's difficult to be precise, it is estimated that as of december 31, 2011, the market tolded ability 150 billion or 15 percent of all student loans outstanding. in the 2011-2012 academic year, banks supervised by the fdic held about $14 billion in outstanding private student loans. the fdic supervises private student loan lenders using the same framework of consumer protection, rules, policies and guy dance as for ore loan -- oh loan program -- other loan programs. the account management policy applies to student loans as it does to other unsecured personal loans. this policy provides institutions with guy dance on classifying retail credits and on establishing policies for working with borrowers

experiencing problems. private student loans held by fdic supervised institutions are generally performing satisfactory hi. they have a past due ratio of just under 3% and a charge operate of just over 1.5% a year. while the overall performance of these private student loans is satisfactory, we understand that many borrowers are currently having difficulty repaying their loans, and we encourage the banks we supervise to work with troubled borrowers using the guidance provided by the retail credit policy. the retail credit policy provides institutions significant flexibility in offering prudent loan modifications. institutions are responsible for establishing their own modification standards within the principles set forth within the retail credit policy. they must also monitor the performance of modified loans to insure that their standards are reasonable. we make clear to our institutions that we will not criticize banks who are engaging in alternate repayment plans or modifications that are consistent with safe and sound

practices. in the end, prudent workout arrangements are in the long-term best interests of both the financial institution and the borrower. under the policies they established, fdic-supervised banks offer troubled borrowers forbearance from periods ranging from three to nine months beyond the original six month grace period after leaving school. a number of workout plans are also available to borrowers of institutions we supervise including interest rate reductions, extended loan terms and in settlement situations, principal forgiveness. however, it is important that workout programs not leave the borrower worse off. for example, a workout that resulting in significant negative amortization can leave a borrower deeper in debt. concerns have been raised that troubled debt restructuring accounting rules or tdr rules limit a bank's ability to modify student loans. the tdr rules are established by generally accepted accounting principles which banks are

required by law to follow. however, the tdr rules do not prevent institutions from working with borrowers to restructure loans with reasonable terms. the fdic will not criticize a restructured loan. we also appreciate the significant challenges borrowers face for refinancing higher rate private student loans. one of the more important challenges is the lack of participants in the refinance market. the fdic continues to seek solutions for challenges in the student lending arena. in the next few weeks, we intend to issue a financial institution letter to the banks we supervise clarifying and reinforcing that we support efforts by banks to work with student loan borrowers and that our current regulatory guidance permits this activity. the financial institution letter will make clear that banks should be clear in their transactions with borrowers and make certain they're aware of associated eligibility criteria. we have also formed an internal

working group to engage private student loan lenders and consumer groups on these issues. we are discussing our current policies and the refinancing challenges with other regulators to determine whether additional clarifications or changes of current policies may be needed. thank you again for inviting me to testify. i look forward to your questions. >> thank you, ms. eberly. and thank you all for, very much, for your testimony. as we begin questions, i will ask the clerk to put five minutes in the clock for each member. this question is for the whole panel. if congress fails to act, interest rates will double on some federal stafford loans next week. if these rates double, what do you think the impact will be on the private student loan market? what steps are your agencies taking to closely monitor the

situation and any related growth in the private student loan market? mr. chopra, let's begin with you. >> well, the change in the federal student loan interest rates only impacts future borrowers. so it has absolutely no impact on private student loan borrowers who are currently trying to refinance, trying to pay back those loans. some industry observers would guess that the change in the interest rates might be a slight tailwind to private loan origination, but i don't expect it to be a huge one. >> mr. lyons? >> i think what you may see in the private loan market is that risk-based pricing -- which is what they should be doing today, risk-based pricing -- and i think you should see that continuing forward. it is all is predicated on the

competition within the market and what the competitors are pricing as well. >> from vermilyea? -- mr. vermilyea? >> if loan, if pricing in the government space were to increase, we would expect that the attractiveness, the relative attractiveness of the products would increase. so we would expect growth in new originations. our examiners would monoto have this, they would l monitor underwriting standards. as they increased, their scrutiny would increase. >> and ms. eberly. >> i think that, you know, there would definitely be an impact on borrowers of the federal program going forward, as mr. chopra noted, with the increase in interest rates. but the impact on the private market, i think, is really unclear. the private market does engage in risk-based pricing, and so the pricing of the federal loan

product is not really a factor in the private loan product. i would add that i would expect that students would continue to try to exhaust federal loans first before moving to private loans just because of the available options under the federal loan program for repayment and rehabilitation in particular that aren't available under the private program. >> mr. lyons followed by mr. very -- vermilyea and ms. eberly, the agencies do not have public guidance tailored to private be student lending. instead, interagency policy and -- [inaudible] retail credit that was last updated over 13 years ago. some have suggested that this guidance prevents private lenders from grinding --

granting appropriate relief to borrowers. what flexibility do lenders have in working with borrowers to prevent default, and what additional steps will your agencies take to provide clear, up-to-date can loan workout guidance for private student lenders? mr. lyons. >> senator, the interagency guidance, as you said, was prepared 13 years ago. the occ in 2010 provided some additional guidance to our examiners which addressed forbearance wokout programs -- workout programs and so on. and it was ditch driven by the fact that banks were not properly recording workout transactions and forbearance transactions on their books, so we provided examiners with clarification and further guidance, and as i said, it was in 2010. having said that, banks -- and we continue to encourage banks to work with customers. there's nothing in the guidance, either the uniform retail

guidance or the occ guidance that prevents a bank from working with a customer: the bank does have the responsibility of properly recording that on their books. >> mr. vermilyea, do you have anything to add? >> [inaudible] and articulates timeless principles of risk management. it is not a prescriptive piece of guidance. it does not declare certain types of things out of bounds, but instead encourages borrowers to -- i'm sorry, banks to work with their borrowers when they can reaffirm the ability and willingness of the borrower to repay. >> ms. eberly? >> i believe that the retail credit policy guidance does offer institutions the flexibility to work with borrowers and, in fact, our --

the institutions that the fdic supervises have used that flexibility and offer a range of workout programs. the one that i highlighted earlier was a differing range of forbearance after the initial six month grace period. it ranges from three to nine months in the institutions we supervise. so we have not set forth anything concrete or prescriptive, but our institutions are using the flexibility and the guidance in the way that it was intended. >> senator crapo. >> thank you, mr. chairman. mr. chopra, last month the bureau published a report on the effects of student debt on young people's economic futures, and in that report you make several policy recommendations including spearing a more robust finance market, offering more relief options and a possible credit report clean slate program. it's my understanding that some of these proposals may require legislative changes. have you heard from the lenders and the regulators about the

merits of these programs, and do you believe that the lenders currently have the tools and legal authority to participate in these programs? >> well, all of those suggestions that we put forth in the report were a summary of public comments that we with receive, and many of them, in fact, would not require legislation. in order to maximize the value of a troubled loan portfolio, banks and other financial institutions generally go through the process of identifying interventions that would increase the net present value of those loans. as the other panelists have mentioned, restructuring those loans is something where safety and soundness as well as helping borrowers seem to go hand in hand. and i share the concern of many investors, both equity and debt, who would hike to see

financial -- like to see financial institutions maximize the value of these portfolios. it also insures that those customers become lifelong, loyal customers and can continue to spank with that institution -- bank with that institution. borrowing mortgages, auto loans and other things that may provide higher net income to that institution. >> thank you. and for the other, the other regulators, i've heard from many lenders that they are, they're willing to offer more relief options. however, if the lender does modify a student loan, then they have to account properly for modifications under their books under the gap accounting standards, and a high number of modifications could signal to the prudential banking regulators that the lender's portfolio is not safe or sound. thus, we have a situation in which the cfpb is advocating for certain relief options that may not be possible under current guidance and prudential banking

regulations. first of all, is that correct, and how can lenders offer loan modifications without running afoul of the safety and soundness and accounting standards that they now must qualify under, or must pursue? mr. lyons? >> senator, we encourage banks to work with customers when there are, when they have financial hardships. that would be reflective in the portfolio regardless of whether they did that or not, so whether it was a tdr or not, you would probably have a past due loan, so the risk would still be identified in the portfolio. so we encourage banks to work with customers before they get to the point where it's severely delinquent. banks do have the flexibility of offering a number of different programs, but as we did say, they are responsible for accurately sport reporting those trans-- accurately reporting those transactions on their balance sheet. the risk profile of those portfolios. >> thank you. mr. vermilyea?

>> very similar. we, we expect our banks to work with borrowers in a way that benefits both the bank and the borrower. a restructured loan that is performing is far better for everyone than a severely delinquent loan or a chargeoff. we also expect banks to follow basic principles of sound risk management. typically, for a bank that has a large portfolio of restructured loans we would expect them to segregate these loans from others on their balance sheet and then monitor the risk characteristics of this portfolio, understand the probability of default, understand the loss giving default and hold appropriate reserves and capital. if a bank could demonstrate with their data that these loans performed in the same way as past credits, then that would be a perfectly appropriate outcome. we always expect be banks to follow accounting guidelines as well. >> thank you. ms. eberly? >> i would agree with everything my fellow panelists have said, that, you know, when you have a troubled debt restructuring, you by definition have a troubled

debt to begin with. so the actual accounting designation of the tdr really doesn't impact the examiner's view of whether or not the debt was troubled to begin with. it does impact the examiner's view about the bank's ability to work that borrower, and turn a problem situation into a better situation. a troubled debt restructuring indicates the bank is working with the borrower, taking a bad situation and trying to find a way out. it is important that we, our examiners do take a look on the back end, as mr. vermilyea noted, of an institution's results with their troubled debt restructurings, with their modifications to make sure that modification programs are reasonable and are ending up in a result that is good for both the consumer and the bank. >> thank you. thank you, mr. chairman. >> senator reed. >> thank you very much, mr. chairman. mr. chopra, you are responsible for coordinating with the

department of education, and also you are responsible for reviewing the services, is that correct? people who are servicing these loans? >> the bureau has a number of initiatives with the department of education and has supervisory authority over large financial institutions over $10 billion in assets for consumer financials with servicing operations as well as we have proposed supervision of certain large nonbank services. >> right. let me ask a question. to what extent are these loans held by servicers in sort of trust arrangements or held directly by financial institutions so that they can, in fact, negotiate with their customer directly? >> that's a -- in private student loans i would say roughly half are held in abs trusts where there is a master servicer and appropriate guidelines in governing those

changes to the notes would apply. a key difference between subprime mortgage, mbs or private student loan, abs, is that it appears that the servicers, generally speaking, have more discretion relatively speaking to, in the mortgage world with, of conducting certain interventions that may maximize the value for those debt investors. >> are they taking those advantages, from your perspective now as you get ready to regulate them? >> well, our oversight solely relates to consumer financial laws. there is certainly activity to restructure certain loans within certain players that hold, that service asset-backed securities whose underlying assets is private student loans. but i think in general the activity of modifying or

restructuring debt that may be in the best interest of the debt investor and the borrower is troublingly low. >> troublingly low. thank you. mr. lyons, do you supervise both the banks and the services that are part of the holding companies you supervise? how does that -- >> well, if it's conducted in a national bank, we do supervise national banks activities whether it's on the books or being serviced by the national bank. we'll look at that activity as well. >> and is it common for banks to maintain a loan on their books as performing because they hope ultimately to collect something since these loans aren't dischargeable in bankruptcy? >> student loans are not dischargeable in bankruptcy. that does not mean that the bank should not under certain circumstances show impairment or charge that loan off if it's not -- >> but do they routinely show

impairment, or do they assume that, one, they will collect eventually -- under accounting rules -- >> with under accounting rules that we enforce, we expect the bank to show impairments and take chargeoffs when they become past due over 120 days -- >> and what is the general record of impairment of student loans today in the institutions you supervise? high? low? >> so there's eight banks, eight national banks that conduct private student lending. each one of those banks has engaged in some type of workout or forbearance. the number is not very large, okay? the performance in those portfolios has been pretty good. as we've said earlier, the past due rates are generally in the 3-4% range, and the loss rates are generally on the 4-4.5%, so the performance has been relatively good. >> that is of this vintage loans -- >> that's the entire portfolio. so that would cover all vintages. >> okay. and is there any difference between those loans held by the

institution and those held by a servicer affiliate of the institution? >> the -- i'm not sure what the servicer portfolios, the delinquency rates there. what i quoted you is what's on book. >> mr. vermilyea, how about the service of portfolios? since the holding company, presumably a holding company subsidiary, are you noticing high levels of default or high levels of modification? >> that data that we have is very similar to that cited by colleague from the occ. we don't have data that distinguishes the delinquency and default rate for loans where the servicer is separate. we can follow up on that. >> please do so. but i, again, i just want to confirm, mr. chopra, from your perspective your point was that you're not seeing the kind of modifications numbers that would follow from the loan crisis that you're seeing in terms of

delinquencies, is that a fair statement? i don't want to -- >> the, there's, of course, usages of forbearance as the other panelists have mentioned, but i don't think there's a significant amount of concessions given by lenders appropriately noting that in their accounting statements and then redoing the loan. it's a very low volume. >> thank you. >> senator warren. >> thank you, mr. chairman. as we've seen in recent studies and as some of our witnesses have testified today, private student loans carry high interest rates, they're difficult to restructure, and in many cases they have created a barrier for people trying to buy their first be homes. and that's why i was surprised that a federal home loan bank has been making available an $8.5 billion line of credit to the nation's largest private student loan company, sallie

mae. the federal home loan banks were established to expand home ownership, but now it seems that they are undermining that goal by helping finance more student loan debt. in addition, the federal home loan banks get extraordinarily cheap access to capital thanks to government sponsorship, and that cheap capital was provided to sallie mae. and let's be specific on this, sallie mae has been getting this line of credit for one-third of 1% interest. and then turning around and lending money to students at a rate of about 20 times higher than that. so yesterday i sent a letter to fhfa acting director ed dimarco because he regulates the federal home loan banks, but you're all experts, so i want to ask you about this too. does it make any sense for a

fortune 500 company that makes high profit student loans to be able to borrow money for less than one-third of 1% from a program that has federal backing for home ownership? mr. lyons, how about if we start with you. >> senator, the occ does not regulate -- >> i understand that. i understand that. >> mr. so i'm not familiar with that program. >> but i'm asking you the fundamental question. >> the fundamental -- >> they're getting money at a third of 1% -- >> right. >> and then turning around and lending it to students at many multiples of that. >> so, senator, can i please speak to national banks? the rates that the national banks are charging for private student loans today are comparable to what they're being charged for federal loans. so there is a spread there. national banks are offering rates libor plus, relatively the plus. >> --

>> so you're telling me it's like federal loans which this year will make $51 billion in profits for the federal government. i'm not sure i find that reassuring. ms. eberly, do you have any comment on the question about the federal home loan bank boards lending to sallie mae at a third of 1%? >> so i think the issue you're raising is a public policy issue. the federal home loan bank is authorized to make loans that are secured by the former federal loan program collateral. so lopes that were issued by -- loans that were issued by institutions with a federal guaranteed. so that is allowed -- >> i'm not asking the question whether or not they braved illegally -- behaved illegally. i think we've heard from our witnesses today that home home ownership is, may be undermined, that there's data suggesting that home ownership is undermined by the growing amount

of student loan debt. and so i see the federal home loan bank board seems to be heading in opposite directions at the same time. mr. chopra, do you have any comment on this? >> [inaudible] >> hit your button. >> oh, i'm sorry. i have no idea about that, the appropriateness of that arrangement. it is true, though, that data would suggest that student loan borrowers are now less likely to have a mortgage. >> all right. that's a helpful point. but really worrisome about the policy that we're following here. let me ask another question. i understand when we first started why we called student loans subsidized. but this year the government will profit $51 billion from the student loan program. the new loans will make a profit of $184 billion over the next ten years. and it turns out that even the so-called subsidized loans make a profit of about 14 cents on

the dollar. the student interest rate is scheduled to double july 1st, and so the question i have is why do we call these loans subsidized? i don't get this. why are they called subsidized? mr. lyons? >> senator, you're referring to the federal program that the national spanks don't lend into, they lend into the private market, so i'd be happy to discuss the private market. >> i take that as a no. mr. chopra? >> well, the reason why it is called subsidized is because in the old bank-based program where they gave federal loans that were guaranteed, the government gave subsidies to the financial institutions for interest accrued during periods such as being in school. >> are we doing that anymore? >> no. that program has ended. >> no. so we call these subsidized loans even though today the program has been completely changed and, in fact, is making a profit for the u.s. government. so i just want to say, you know,

this just seems wrong to me, mr. chairman. the government lends to banks at three-quarters of 1% interest then does a huge markup on student loans, will make $51 billion in profits this yore. sallie mae borrows at one-third of 1% in a program that is supported by the federal government and then does a markup on student loans. it's time for the government to stop making a profit off our students. thank you, mr. chairman. >> be senator brown. >> thank you, mr. chairman. mr. chopra, give me your thoughts on our refinancing re-fi for the future act and answering some of the questions and concerns on the 150 billion outstanding dollars and for the future what this means for private bank loans? >> so without knowing specifics, i can say that it is absolutely important that we address the large population of existing borrowers and not just the new

borrowers. many of those existing borrow or es were certainly victims of a financial crisis that they played no role in creating, and they wonder why they've been unable to take advantage of today's historically low rates. and just as in 2008 there were market failures that provided for temporary authorities to insure financial institutions could originate loans, there's no authorities currently to jump-start that sort of market. so it seems that it's worthy of very careful consideration. >> thank you. this is for all of you. student loan debt is, as a number of people have pointed out -- senator crapo and the chair and others -- is the second largest form of consumer debt behind mortgages. and i see some similarities between these two, these two issues, these two lending institutions in some sense, if you will. the biggest banks we hear repeatedly are, finding out more

information last week, are doing a generally poor job complying with the national set element over their -- settlement over their improper foreclosure practices. homeowners have had some of the same problems that responsible student loan borrowers are having. they can't refinance, they can't negotiate a deal for an alternative repayment arrangement with the institution with whom they have their mortgage. but some large financial institutions are at least trying to pursue some mortgage modifications to stem their losses. so, and so i -- but with the student loan market, it doesn't seem like that refinancing is happening with very, very, very few exceptions. despite the federal reserve's testimony, quote, that student loan modifications are generally in the best interests of both the institution and the borrower, can lead to better loan performance, increase recoveries, and they'll view such modifications as a positive action when they mitigate credit risks. so even though the regulatory bodies are saying this makes

sense for banks to begin to refinance some of this $150 billion in outstanding student mortgage debt, why, why -- i understand this is a small portfolio for citibank or for some of these large institutions, the student loan market is not very large relatively for them. but each of you answer why are the banks not willing when regulators are saying this makes sense, when common sense suggests that this makes sense to refinance, why are the large banks simply not coming to the table to refinance these student loans? i'll start with you, ms. eberly. >> certainly. it's a good question why there's not an active refinance market for student debt. there's nothing in regulatory policy or practice that prohibits borrowers from refinancing their student debt. none of the institutions that fdic supervises used prepayment penalties or anything that would prevent a borrower for actually engaging in a refinance. part of it may be that the

interest rates relative to other unsecured consumer debt available through banks is actually priced a little higher than student debt is. so that may be one factor. the underwriting criteria used by the institutions that fdic supervises usually requires a guarantor which means the debt is underwritten at a rate that reflects that you've already got an established borrower listed on the debt. so you may be starting out with a low rate to begin with based on that established credit history as opposed to a student on their own. so that doesn't address any maybe legacy loans that are outstanding, that are at higher rates of interest or that weren't guaranteed, you know? so it is unclear why there's not an active market to meet apparent demand. so i think the proposal's very interesting, it's something we'd be interested in working with you on. >> mr. vermilyea, sort of this issue of too big to fail with these largest banks. it's coming back again. is this sort of a too big to

care sort of situation with these large banks with a relatively smaller portfolio? they're just sort of disdainful of doing anything with refinancing student loans? >> i don't think it's too big to care. i think they're interested in profit opportunities where they can find them. i would associate myself with the response from the fdic. it's not clear why this isn't happening more. our regular that story policy would certainly -- regulatory policy would certainly permit it, indeed encourage appropriate workouts. so like the fdic, we're interested in exploring this further. >> mr. lyons? >> senate, i would ec -- senator, i would echo the comments of my federal regulators. i think also it may reflect possibly some market inefficiencies like competition as well as, ms. eberly said, many of the private student loans today are priced off of a

cosigner, so they are actually at a low or rate than would normally be the situation. so, you know, that may also factor into why we're seeing low refinancing opportunities. >> mr. chopra? >> well, as you mentioned, net income from private student loans is a very small fraction for large financial institutions, and as we note in our report, many of those financial institutions, senior management is still addressing legacy issues of troubled portfolios particularly in the residential mortgage space that may be occupying significant management bandwidth as well as their issues with the flexibility and agility with their i.t. and accounting systems. >> great. mr. chopra, your comments earlier about, you know, the establishing -- what puzzled me further about this that you mentioned earlier was that these large institutions, these institutions that are simply not indifferent to if not hostile to

refinancing are the same institutions that, i would think, would want these young people to whom they loaned them this money to be lifelong customers and get a mortgage someday when they can pay off their student lobes and start businesses and all the things and use these banks with whom they have a relationship. but that doesn't seem to be the case. thank you, mr. chairman. >> senator -- [inaudible] >> thank you, mr. chair, and i'm going the tart by addressing something. as we were sitting here, the supreme court released a ruling eviscerating the voting rights act and deeply disturbed about that. the strategy of voter suppression has been used against blacks, latinos, elderly, the poor, immigrants. we had a situation in our history where new york city politicians held registration days on jewish holidays to keep jewish individuals from voting. we have had all kinds of forms of efforts to not embrace the

full ability of citizens who participate in our democracy. and today we have strategies that include voter id laws, the reduction of early voting hours, the crawing of discriminatory districts, and so we are not in an era free of strategy to block people's ability to participate as full citizens, and i think it's deeply disturbing the 5-4 decision that just came out, it's deeply disturbing. at the topic we're addressing right now on the cost of student loans, it seems like we have a new form of debtor's prison for our students, because the loans in combination with the interest rates means individuals are having to delay living independently, delay marriage, can't get a loan to why -- buy a

house, or if they do their credit score is a lot higher so he was to pay a lot more in interest to buy a home. can't get a loan to start a business. may be with disadvantaged in employment interviews. all of these are factors that compromises one's ability to thrive. and one of the pieces that's disturbing to me is these private loans vary their interest rates according to the credit background of the applicant even though the loans are guaranteed which means that if you come from a background in which you have less wealth, that you are going to have to pay a higher price over a very long period of time to get an education. thus, locking in inec equities from one generation to the next. are any of you disturbed by that bias in the system and, if so, what do you think we should do? doreen -- or, ms. ebbler i,

perhaps we can start with you. >> so i may have misunderstood the question, but the private student loans that we have supervisory responsibility for, the lenders that make those loans, um, those loans share a similarity with federal student loans in that they're not dischargeable in bankruptcy, but they are not guaranteed by the government. so that is a key distinction. so the institutions bear the risk of loss for a default on those loans. institutions are offering, the institutions that we supervise are offering a choice of either a variable or a fixed rate of interest at the onset of the lending agreement, so the current variable rate of interest ranges between 3-9%. the fixed rate between about 5.5-11.5. >> is it fair to say someone from a background where they have less, less wealth, less assets is more likely to pay the 9% than the 3% and, therefore,

pay a much higher price for their education? >> so it is true that an individual that had a less strong credit history would pay a higher rate of interest. >> so, yes. the answer is yes. >> it's risk-based, yes, based on the individual's credit history. >> i take your point on the national guarantee, and thank you for pointing that out. does this bother anyone else? >> well, senator merkley, the private student loans are often underwritten to the fico score and income of a cosigner. so for borrowers whose parent, say, is not very creditworthy, they, in fact, would have a higher rate when they were freshmen. and i think that many of them wonder once they do graduate and land a very good job, they wonder that given that their risk profile may have

considerably slunk, they have developed their own credit history, why they may -- why they're unable to find a product in the market that is a lower risk-adjusted price. >> and they wonder about that because they're not able to refinance? >> that's right. and i think many of them see the incredible savings that perhaps that their parents, who may be homeowners who have been able to refinance given today's historically low interest rates. >> does this system in general as we've described it here create extra hurdles for those who come to the education marketplace with poor assets? >> well, there are certainly issues with market efficiency when risk does -- when price does not seem to match risk which seems to be an issue. >> mr. lyons, is there kind of a bias that reinforces differences in background? >> senator, i don't know that

answer. i do, i would echo what doreen eberly indicated as we expect things to risk price, they do risk price. to the extent a student utilizes all of his federal grants and loans and then has to move to a student loan, private student loan, that loan would be risk-based priced. >> over the -- if you have a loan that's 9% versus one that's 3 %, would it be fair to say by and large that loan is going to be three times as high? >> not necessarily three times. but it will be more expensive. >> the interest rate. >> yes. >> and thus, a low income student with parents who have a hoe credit score might pay three times the -- >> to the extent it's a higher risk, the bank would charge a higher rate of return, yes. >> thank you. thank you, mr. chair. >> senator heitkamp. >> thank you, mr. chairman. just a couple points, and i don't remember if it was

mr. lyons or mr. vermilyea who gave us the side-by-side comparison, 2004 to today. i think it was you. you might want to add another statistic to your record there. 55% of all private loans in 2005 had a cosigner. today it's 90%. we're not only mortgaging our kids' future, we're mortgaging their parents' future, their grandparents' future, and we're putting their home ownership and their retirement at risk. this is a big issue. the issue of cosigning. and so i just raise that because i think it's important to put that on the table. a couple, a couple issues. one on transparency and one on a recent visit that i had in north dakota where i had a chance to sit in the car and actually listen to the radio. and this is for mr. chopra. have you seen the 1-800 numbers

or heard 1-800 numbers get yourself out of student debt trouble, we're here to help? they sound a lot like the predatory lending that we've experienced over the last how many years with home mortgages or consumer debt, credit card debt. and i see an entrance now, an opportunity to move into that market by people who are engaged in the predatory lending practices, and i'm wondering if you guys are monitoring that, paying attention if there's anything congress should be doing right now to you to educate students, but us to get out ahead of it on a regulatory basis. >> well, we're certainly familiar with the increase in debt collection and debt relief activities as the conditions in the student loan market for many have been quite challenging. for borrowers who have federal student loans, they are marketed services to pay a fee to enroll in certain programs that may

help them get out of defaults through the department of education which may be at no cost. so, of course, we are looking to educate consumers and insure that all financial be services providers are complying with the law. >> just to follow up, one suggestion that i would have -- and i know budgets are limited -- but the ability to advertise on the same platform, to educate on the same platform is critical because what they're not advertising to kids on, you know, 790 talk radio, they're advertising to those parents who have cosigned those loans. and that's a big concern that i have. i want to, mr. lyons, you raised a very important point, i think, on transparency. anyone who recently has had a mortgage has sat down for almost an hour and a half and done all the due diligence, signed all of the, you know, awareness, yes, we know we're mortgaging away our life. you know, frequently what happens to a kid and their parents on student loans is the

paper gets vid across the -- slid across the desk and sign on the line if you want a better future. and for a lot of especially first be generation college goers, there isn't maybe a levelover sophistication on what the alternatives are. so i'm wondering if anyone on the panel but particularly you, mr. lyons, since you raised the issue have some suggestions for what we can do to promote more transparency in the private marketplace and, you know, whether that should be mandated, encourages or otherwise talked about. >> thank you, senator. i would agree with the recommendations that the cfpb put forth regarding disclosure and clear transparency -- >> but how do we get banks to do that? >> and i think banks have taken steps over the last several years since the crisis to improve transparency, so there is discussions before, during and after that they provide the students and the student's family whereas in the past that may not have been the case.

>> one thing i would suggest, and my time is short and that's why i'm interrupting, and i'll follow up with additional questions, but this needs to be done in conjunction with institutions of higher learning. i have a student who's a first generation student, he has a music major, and he's living in his parents' basement. his parents, i'm sure, are on the same level of debt. he'll never get out from underneath it, and we've guaranteed that by not discharging this debt in bankruptcy. and so with a little bit of education about, you know, what that education is worth compared to earning power into the future and what we need to do to educate kids not only as they pursue their dreams, but taking a look at what the earning power are of the choices they make in terms of education opportunities. and so i think you're only one part of the problem. i wouldn't say problem, but you're only one part of the solution which is here it is financial literacy, but back it up with, also, education on what the earning potential is for

these students, and maybe banks can be part of encouraging that as well. thank you, mr. chairman. >> senator manchin. >> thank you so much, mr. chairman. we were talking about public policy, and i liked your input since you're part of the public. i think you're hearing from all of us that we believe that education being, and the facts are overwhelming, that education adds to the value of not only the person, their well being, their families, their communities, the state and the nation. we all, i believe, have that agreement. we're all products of it, probably. with that being said, is it your opinion that we should not make a profit on education when it comes to loans? that's a public policy. we've got to make that. we need your input. so if i can just start with you, ma'am. >> well, in the -- so i'm not sure if you're talking about in the federal sector or private sector? >> i'm talking about public policy. do you believe public policy should be that profit should not

be made on education loans of any kind? so if we can just kind of pay itself and break even, or do you put the same procedures and the same policies in place as you do any other type of loans? >> i think it's an interesting question, and i think you'd have to differentiate between the federal sector and the private sector in answering that question. >> not really. >> well, in the -- >> it's public policy, it's public policy. >> yeah. >> so maybe your cost is a little different. maybe your whole policies are a little different, but there's still a spread. there's a spread taking a lot of things in consideration. do you believe that spread should be zero or minimized to the point to where there's no -- i'm just asking a simple question. >> yeah. i think it would be hard to calculate a zero spread on the private side just because the institutions bear the risk of loss so there's not the government guarantee -- >> you don't have a public opinion then on -- >> so, you know, i, it's really not my area of expertise -- >> you have an opinion, you're public, you have

representatives, congress and the senate. what would you say to your congressman and senator? >> where you know, i'd have to think about it. i haven't thought through this. >> in the private markets, we need to take many factors into consideration. of one is credit availability. >> i think the simple, i'm just asking a simple public policy. do you believe -- here we set, do you believe we should not make a profit if we can keep from making a profit on trying to educate this great society of ours? >> my concern would be that if there were a mandated zero spread, for example, that there may not be credit availability in the public -- >> so you're saying that, basically, in the public -- private sector that the almighty profit on every aspect of life is going to prevail? i'm just, i'm not -- i'm a private business person. i'm just saying you have to put your priorities where your values are. if education's what's built this country, education has -- this is the greatest country on earth, how do we get there?

and have we left that premise? is everything the almighty dollar, the bottom line to the point where we're trying to educate the masses? it's a public policy. you're talking -- i'm your senator. what do you want me to do? >> so i -- education policy is not in the remit of the federal reserve, and the governors have not spoken on this issue, so this is a matter for congress. >> okay. now you know why we have a stalemate in congress now, because we can't even get the public to engage. that's -- and i know you're looking, and you have to be careful what you're saying. i'm just trying to get input. sir? >> well, i'm not going to expand the discussion much further, senator. [laughter] i don't think it's appropriate for a prudential regulator to take a public policy decision. having said that, it would be difficult to attract capital to a business that doesn't provide profit to the investors. just a consideration. >> you think, basically, the american public and the investors in american society would not invest in education knowing it would be a zero return? >> that's, i think that's a

possibility that has to be weighed. >> okay. mr. chopra? >> well, senator, the -- i agree with others that investors will not be able to earn a return on equity if they cannot earn any margin. but as it relates to your general question of profitabout, the only thing i can add is there is data from a number of sources that do, that does suggest there are positive externalities of a highly educated work force in the sense of global competition, wage growth and others. and certainly, policymakers may or consider that when developing policies to promote a highly educated work force. >> >> yeah. i'm talking -- primary and secondary education were mandated by the institution for every state to subsidize and pay for which i agree wholeheartedly, and we all do that. higher education there's not a word in west virginia that says we have to give a penny towards that. so our founding fathers a long

time ago thought this was a high value, good return, and we got involved. and we do. we're talking about a financial program that doesn't cost, we're not subsidizing. we're not asking someone to pay. it'll pay for itself. should we remove the profit where possible, and i think that's where -- now, can we find that balance somewhere so we can all be satisfied that you can still have enough money that we can keep the program alive, but we still have taken the amount of profit out that it puts the burden on the backs of productivity. i think that's it in a nutshell, and that's what we're coming to, and we've got so -- since we're not getting much help from the input from our constituents, we've got to be able to cipher through this one to find a balance between our colleagues on both sides of the aisle. thank you, mr. chairman. >> i want to thank our witnesses for their testimony today and for their hard work on this important issue. this hearing is adjourned.

[inaudible conversations] >> massachusetts senator mo cowan delivered his farewell speech yesterday. he's been filling secretary of state john kerry's former seat since february until the special election. massachusetts residents this week elected representative ed markey as their new senator. this is 20 minutes. >> mr. president, i rise today in my final full workweek and not just 150 days into my senate career, yet at the precipice of the close of that career. on january 30th of